Winter Activities

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Partners,

 

One of the most important times of the year is now upon us, keeping busy in the office with paperwork. Beginning in late December, we have been plugging away, finishing up the 2015 calendar year, and making plans for 2016. Final rent checks have been sent, W-2's have been filed, 1099's are in process and we are working on financial statements in preparation for tax season.  Budgets for the 2016 crop year are being fine tuned, and we are negotiating with input suppliers for fertilizer, seed, and chemicals.  Our budget for equipment shopping is simple this next year, little to nothing.  We are not planning to replace any equipment, knowing that it will result in modestly higher repair bills and some minor delays.  The good news is that our line of machinery gets a thorough inspection for safety and all preventative maintenance will be completed prior to going to the field.

 

Phyllis continues to work diligently with our management accounting system, Centerpoint by Red Wing, and I (Marcus) recently traveled to Austin, Texas to attend an intensive management workshop known as TEPAP (The Executive Program for Agricultural Producers).  I was able to network with the best and brightest in Agriculture from all over the nation as well as a handful of foreign countries, while gaining insights on how to best position our farm to thrive in all environments.

 

Lindsay and Keith are now only three weeks away from the birth of their second son!

 

We had planned to finish January deliveries of corn last week, but due to high river levels on the Illinois river, it was necessary to wait until this week.  It is important to be able to haul grain out while the ground is frozen, as we have a few remote storage bins that are not accessible by gravel driveways.  We always look forward to having those facilities emptied out so we can fully enjoy the more modern facilities the remainder of the delivery season.

 

Agriculture is still in the process of "resetting" after the rise of the Ethanol Era, which was followed by erratic weather throughout the world, both of which led to a longer than normal period of high grain prices.  The primary question on everyone's mind is "How far through the reset period are we?"  These cycles have always been a constant in this industry, and the goal is to be able to not only survive tough times, but to be able to grow strategically as opportunities could arise.  

 

As I was reminded last week in Austin, it is critical that we all take a moment to be thankful to operate a business in this country, and for the good fortune to be able to farm on soils that could only be dreamed about in the vast majority of the world

 

Fall Grain Prices:

Corn:          3.55

Soybeans:  8.57

 

We have enjoyed seeing a lot of you in recent weeks, and look forward to seeing more of you soon.

 

Best regards,

Marcus

Winter = Meetings

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Partners,

We continually strive to stay abreast of the ever evolving agricultural landscape.  Phyllis and I just returned from the annual DTN/Progressive Farmer AG Summit in Chicago.  The theme for this year’s meeting was "Mastering Your Margins: Strategies for Ag’s High-Risk Cycles.” This provided us with three intense days of speakers, seminars, breakout sessions, and networking opportunities.  I really enjoy the DTN Ag Summit each year because it helps me with the effort to keep a finger on the pulse of the global agricultural industry.  It also helps me to stay focused, gain fresh insights, and be a better manager.

I thought I would share with you a brief overview of some of the topics that were discussed:

 

Risky Business:  Ag’s Climate Change Challenges (Greg Page, Executive Director, Cargill Inc. Board of Directors)

  • More effort should be focused on possible solutions, rather than debating (the highly debatable) cause
  • Long term planning of land usage needs to factor in the changing crop growing degree days
  • Fish are very poor feed conversion creatures so aquaculture is not as promising as some had hoped
  • Ruminant animals (by nature) have lighter environmental footprint

 

Weather Meets the Technology Frontier (Jim Block, chief meteorologist, Schneider Electric) & After El Nino: 2016 Crop Weather (Bryce Anderson, ag meteorologist, DTN/The Progressive Farmer)

  • There is an astonishing amount of weather data being collected around the globe
  • Weather data is being recorded and analyzed by increasingly sophisticated computer programs
  • Weather forecasting will continue to improve
  • The frequency of extreme weather events will increase

 

A Lender’s View of the Farm Economy (Mary McBride, president, CoBank)

  • US economy is moving into a "not so bad" zone, and arguably the best economy going globally
  • A strong U.S. dollar is a negative factor on agricultural exports
  • There are now record world stocks of Soybeans and Wheat

 

Mastering MarginsPost-Crash (Chris Barron, president, Ag View Solutions)

  • It is absolutely necessary to accurately measure all aspects of our business
  • Economic survival depends on focus on higher yields and lower cost per unit

 

Brazil’s Soy Fronteir at Middle Age (Renato Rasmussen, Brazil economic analyst, Rabobank  Guilherme Scheffer, financial risk management director, Grupo Sheffer)

  • Brazil has doubled SB production the last 15 years and now exports more than the US
  • They have the potential for 3 crops per acre per year—(e.g.:  Soybeans, corn, cattle)
  • Their average cost of SB production now is 7.10

 

Bottom-line on 2016 Market Outlook (Darin Newsom, senior analyst/DTN/The Progressive Farmer)

  • The 4 C's (cattle, corn, crude, cotton) have all entered a new paradigm this past year
  • The markets we are in now will not change till there is some sort of weather disaster somewhere in the world

 

Leadership the West Point Way (John Sterling, Lt. General, U.S. Army (Ret.)

  • Be-Know-Do
  • 3 kinds of leadership--Direct, Organizational, Strategic

 

Wrap-up/Take-Home Strategies

  • Cash burn rate on corn acres next 3 years could be over $400/ACRE
  • Get financials in order
  • Be a problem solver

 

Overall, the experience was a bit sobering compared to last few years. Phyllis and I are old enough to remember the 1980s; we feel like this is the next generation learning experience for “Mastering Your Margins” when the going gets tough.

 

Current prices:

Corn 3.65

Soybeans 8.81


Steve